Who collects the annual fee for USDA loans?

The correct answer highlights that the lender is responsible for collecting the annual fee for USDA loans, which is then typically held in an escrow account. This process is fundamental because it allows the lender to manage the fee in a structured manner, ensuring that it is paid on time and used appropriately to cover the ongoing costs associated with the USDA rural housing programs.

By collecting the fee upfront and holding it in an escrow account, lenders can streamline the payment process for borrowers, making it easier to manage these fees over the life of the loan. This practice also helps maintain compliance with USDA requirements while providing financial transparency for both the borrower and the lender.

In other scenarios, a borrower paying the fee directly could create inconsistency and confusion regarding payment timelines and amounts. Similarly, if the federal government or a third-party service provider were to handle the fee collection, it could complicate the relationship between lender and borrower and potentially lead to delays or administrative burdens. Therefore, having the lender collect the annual fee and manage it through an escrow account is the most efficient and organized approach within the USDA loan framework.